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Email this citationCIAO DATE: 08/05
Reform of the International Monetary Fund
C. Fred Bergsten
June 2005
Abstract
The most important and urgent issue facing the international monetary system and the IMF at the present time is the huge imbalance in major national economies and exchange rates. The global current account deficit of the United States is very large (nearing an annual rate of $800 billion, almost 7 percent of our GDP) and growing rapidly. The global current account surplus of China is very large (over $100 billion this year, about 6 percent of its GDP) and also growing very rapidly. A number of other Asian countries- most notably Japan but also Korea, Taiwan, Hong Kong, Singapore, and Malaysia-are also running substantial global surpluses that are the counterparts of the US global deficits.
We in the United States must lead the correction of these imbalances by raising our rate of national saving so that we will not be so reliant on inflows of foreign capital-which we must now borrow at the rate of $5 billion every working day-and thus condemned to run the counterpart current account deficits, which generate enormous pressures for trade protection (which are now being rapidly realized, especially against China) as well as huge international financial risks. This requires a combination of restoring the budget surpluses that we were running just a few years ago, reducing public dissaving, and increasing our pitifully low rate of private saving.
